When searching for financial products, you should learn what each one requires and the differences between them. If you don’t, you could find yourself agreeing to terms that you don’t financially align with. To ensure healthy financial habits, Superior Financial grants our borrowers and readers the knowledge necessary to confidently apply for loans or other financial products.
Today, we will explain the difference between personal loans and lines of credit to help you decide which is best for you.
Personal loans are the best choice if you’re searching for a one-time expense to pay off over time. Personal loans are a type of loan that gives you a fixed amount of funding at once. These are typically used to finance a large purchase, pay off weddings, or consolidate debt. The payment process is simple and predictable—commonly paid once a month.
Line of Credit
When you see the term “line of credit,” you should consider credit cards. This is an unsecured credit line with a limit and adjustable interest rate. A personal line of credit is a great choice for those who have recurring purchases or need funding in an emergency. Your payments for this financial product can change over time due to the variable interest and are available through many lenders and banking institutions.
What’s the Difference?
The biggest differences between personal loans and lines of credit are how you receive funds and their interest rates. Those who apply for personal loans will receive one lump sum of funding and must pay it back monthly. However, with lines of credit, it acts more like a credit card, with a constantly changing credit line and interest on unpaid balances.
Which Is Best for You?
Consider your unique financial needs and standing when searching for the best financial product. By determining your level of need and deciding which best serves your circumstances, you will find the product that can help you. A personal line of credit is best for unpredictable expenses. On the other hand, personal loans are great for larger purchases, like paying a deposit or funding a trip.
Whichever financial product you need, Superior Financial is here to guide you every step of the way. If you’re searching for personal loans online, don’t hesitate to apply today. We’re always ready to help you, no matter your credit score or history.